Wall Street has been riding a historic roller coaster the past few months due to President Donald Trump’s on-again, off-again tariff threats. Now, investors are learning to take his words with a grain of salt — and a bit of salsa, too.
That’s because there’s a new type of trade taking hold: TACO, short for Trump Always Chickens Out. In other words, don’t fret too much about Trump’s latest tariff threat and go on a selling spree, because eventually he’ll back down and a relief rally will ensue.
Trump said he first learned of the term, coined by Financial Times commentator Robert Armstrong, on Wednesday when a reporter sought his reaction to it.
“I chicken out? Oh, I’ve never heard that. You mean because I reduced China from 145% that I set down to 100 and then to another number?” Trump said Wednesday, referring to tariff rates he imposed on imported Chinese goods. (The rate is now 30%, after Trump raised it as high as 145% last month, much to investors’ dismay, only to reduce it a few weeks later.)
Last week, Trump threatened to impose 50% tariffs on goods from the European Union come June 1. Stocks turned lower after his threat, which he doubled down on later in the day, claiming there was no room to negotiate. Two days later, he said he’d wait until July 9 to levy a 50% tariff on EU goods following promising talks. When US markets reopened after Memorial Day, stocks closed well in the green.
Trump said he was willing to delay the move because EU counterparts called him up saying, “Please, let’s meet right now.”
“You call that chickening out?” Trump responded to a reporter at an Oval Office event Wednesday, referring to his recent announcements on EU and Chinese tariff rates.
“It’s called negotiation,” Trump added, saying that part of his tactic can include setting “a ridiculous high number” for tariff rates and going down if he gets other nations to give in to his demands.
“Don’t ever say what you said,” Trump told the reporter, calling it “the nastiest question.”
The China and EU about-faces are hardly the only ones Trump has made on tariffs.
On April 2, he announced sweeping “reciprocal” tariffs on dozens of countries that were set to take effect on April 9. Hours after they took effect, he announced a 90-day pause for all impacted countries but China, saying investors were getting “yippy yappy.”
Translation: US financial markets, particularly the bond market, weren’t taking his tariff changes well.
Indeed, before he announced the pause, markets had slumped and the S&P 500 had been on the precipice of bear market territory, while bond yields spiked as investors sold off US debt.
After the pause was announced, the S&P 500 posted its best day since October 2008.
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